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Monday, August 20, 2012

Attention on IPO Scene Again with Far East HT

The Far East Hospitality Trust is the latest IPO to heat up the local IPO scene and the 2nd hospitality trust to be seeking a listing in this year. In fact, Far East Hospitality Trust (FEHT) will be listing almost exactly 1 month after another hospitality trust, Ascendas
Hospitality Trust (AHT) got officially welcome to the SGX Mainboard.

I have compiled a table of IPO statistics relating to all Mainboard and Catalist-listed counters for 2012. It can be found in the "IPO SG Statistics" section of this blog for reference. It also details the varying amounts of cash used for balloting and the percentage success rate and expected profits for the initial listing day 'pop'. Do check it out here.

Back to FEHT listing, certainly investors will be wary of the potential 'pop' with this IPO given the lacklustre performance of AHT a month ago. Well, lacklustre seems slightly too unforgiving given the fact that trusts and REITs often get pretty unceremonious welcomes into the listing fray. Indeed, AHT closed on offer price ($0.88) and has gone below listing price only to close at $0.875 last friday ostensibly due investors betting on its earnings report come Thursday in this week.

Now the question is will FEHT outperform that flat result seen with AHT?

From news responses and institutional subscription, FEHT does indeed look like a stronger proposition backed up with much better local presence and management leading up to this IPO. There was a slight blotch on the AHT scoresheet even before listing due to the pull of a considerable asset - its Korean hotel - from its portfolio.It seems smooth sailing with the FEHT so far. Of course, the drawback must be its premium that an investor must now pay for a visibly 'better' trust and management where it has been priced at the top of its indicative range at $0.93. Investors must also stomach the slightly lower dividend yield of 6% promised for this financial year as compared to that of AHT at 7-8%.

I have honestly not immersed myself in the documents of the Far East HT yet and will be doing so tomorrow or the day after next. For now, I am not keen on taking this stock for a 'pop' given the history of AHT and its similarities. The premium further reduces the possibility of a 'pop' on first day.

For those of you yet to subscribe for the Far East Hospitality Trust IPO, the deadline for application is 23 August 12 noon, Thursday.